Position management in Forex scalping and day trading
- Stop loss in Forex scalping
- Taking profits
- Day trading and scalping guide - menu:
It is important to learn how to manage position when you are scalping. There are few important aspects:
Stop loss in Forex scalping
Cut yours loses quick. You will trade with bigger leverage so you can’t afford to have big loses. Hope is a false advisor. There is always the next trade.there is no 100% winning system and you have to accept that there will be losing trades. You have to learn when to close a trade so you can survive and stay in the game.
Moving stop loss higher (when in profit) – manually, trailing stop loss
Simple and effective. With stop loss, you want to protect your money and do not lose too much. With Moving stop loss you want to protect your profit. You can keep it at a distance from the current price. The main idea is that when a price is moving in the direction you want and you are profitable then you move your stop loss.
You can do it manually or use a trailing stop loss.
In Metatrader you simply select value from trailing stop loss menu:
When the price moves in the right direction, it will first move stop loss to break even position. Later it will raise the stop with a value you selected.
It is important that trailing stop loss works only when Metatrader terminal is open. Read more about trailing stop loss in Metatrader here.
Another very important concept. It takes time to master it, but I believe that it is worth a try. The idea is rather simple. We can divide it into steps:
- you open a trade and set stop loss
- when price moves in the direction you want and is some distance from the entry point then you move stop loss to the entry point
- if price moves more in the direction you want, you move stop loss even higher
That is very important. Thanks to that you are sure that in the worst case scenario you won’t lose any money. That is important for both your trading capital and psychic. It is never a good feeling to lose money. You can’t avoid it, but with avoiding loses with break-even you start to think more about money and position management.
That is opposite to situation when you are losing money and you hope that things will change. With break-even approach, you start to realize that you are in control of your trading money and results.
If you have a problem with it, you can use simple expert advisor like Breakeven Expert. Below is an example for Metatrader, but you should find similar solutions for other platforms.
It is a custom indicator, first you have to install it. When you are done, simply add it from Navigator to the chart:
Next, you have to define pips value, when indicator will move stop loss. Value may be different for different brokers (depends if you have format x.xxxxx or x.xxxx). In this case we have 30 value which represents 3 pips for pairs in format x.xxxxx:
We should make sure that autotrading is on:
And three should be a confirmation that everything is ok in form on smiley face in a corner:
When you open a trade, you can set an initial stop loss. Then, after a move of the value entered by you, EA will move stop loss to the entry point.
Download Breakeven Expert for Metatrader here.
Set take profit target
It is important to know where are possible support and resistance lines. This can help you to decide where is a good take profit target. You should remember that markets move very fast when they are close to these levels. That is why in so many cases it is better to close at specific take profit area than to wait for a signal which will lag.
Another great technique to protect your profits. Let’s say that you have a profitable long trade. It is still open and you are a good few pips in profit. You want to close it but there is an important resistance 15 pips ahead. Should you close all or move stop loss higher?
Another solution is a partial close. There is an option to do that in Metatrader (other platforms too). It is simple. You just go to the options menu and close part of a trade. It doesn’t have to be equal – so you don’t have to close half or something. You can specify how much you want to close.
In Metatrader, simply select Modify option:
And select the size of position you want to close:
It is very helpful expecially for longer time frames trade. You want to take some profit, rise the stop loss and let the rest go with the flow. Like in the example below:
It is a great option.
Use data from Pivot points and Fibonacci
When you select potential places to close a trade, many traders look at resistance and support levels from a higher time frame. That is a correct approach, still you can get more information like:
- Pivot Points levels
- Fibonacci levels
Price really respect them and you can partial close your trade to book some part of your profit. The good example is this chart of USD/JPY. Here we can see that we have 1h time frame with weekly Pivot Points. Price stopped (from the left) at weekly S1, weekly R1, weekly S1. If you were in a trade, this was good places to at least close part of your position or take whole profit and exit.
That is an example of higher TF, but it works the same if you are using daily Pivot Points and you are scalping on the lower time frame.
It depends on your trading strategy. Still, it is good to know in advance where important levels where you can take profit and exit.
Basic info about day trading:
- Forex scalping and day trading for beginners
- Best Forex broker, fx pairs, trading hours for scalping and day trading
- Day trading Bitcoin
- Forex scalping and day trading without indicators
- Time frames in day trading
- Trading desk
Management in day trading:
Indicators in day trading
- Forex ATR – trailing stop loss
- Forex Parabolic SAR
- Moving averages
- Bollinger bands
- Fibonacci retracement
- Support and resistance, Pivot Points